What’s Land Worth?

Land -- God certainly isn’t making more of it. With land prices at an all-time high, many are calling it “a safe-deposit box with a view.” If you’ve got the cash, land certainly isn’t a bad investment, although I have a feeling these high prices don't often pencil out in the short term.

From cropland topping $10,000/acre in some areas, to pasture ground exceeding $3,000/acre, the cost of some ground is astronomical. Rent rates have also skyrocketed, with prices reaching $300/acre for cropland, and $100/acre for pasture, in my area of South Dakota. I know rates in many areas are much higher.

I recently visited with a representative of Fay Ranches, a land brokerage company that has earned The Land Report’s Best U.S. Brokerages honor three years in a row. With agents located in Montana, Wyoming, Idaho, Colorado and Oregon, Fay Ranches a good grasp of land-value trends in the American West.

For example, Fay Ranches just sold a 77,000-acre ranch property just outside of Laramie, WY, that was listed at a whopping $20.9 million.

But it’s not just ranchers who are making these big land purchases. Cattlemen have to contend with outside competitors like sports enthusiasts and urban investors, who are looking for an escape from the hustle and bustle of the city as well as promising place to park money.

“Investors are looking for properties that can diversify their portfolio,” says Fay Ranches CEO Greg Fay. “They’re searching for a low-risk asset that will yield both financial and personal returns.”

Fay Ranches offered me a breakdown of their $1 billion gross sales from the last decade. The firm says most of the properties sold in the last three years have been purchased by folks from New York, California and Texas. With more 400 transactions since their inception, they have sold over 1 million acres, and logged more than $1 billion in sales in the last decade. The 2012 average price was $834/acre, with an average purchase size around 1,814 acres/property.

Do these numbers reflect the land values and sales in your area? Are land prices rising, falling or leveling off in your area? Have some people over-invested, and if so, do you see that property exchanging hands again? How can people smartly invest in land?

These are all some of the questions I’m mulling over as I review these numbers. Land is certainly a huge part of the ranching equation, and however you make it work in your area, share your story with us. Leave your thoughts in the comments section below.